It's been a very pleasant week, and indeed month, for BHP Group Ltd (ASX: BHP) shares. Today, the mining giant has lost a little bit of steam, down 0.8% at the time of writing to $48.60 a share. But even so, the Big Australian remains up a happy 9.54% over the past month alone. That gain stretches to a confident 20.8% over the past 12 months.
Just last week, this momentum resulted in BHP shares hitting a new 52-week high. Thursday's session saw this mining stock clock $49.75 a share, its highest price in over two years.
As one of the ASX's largest companies, this share price appreciation has been a boon to anyone holding an ASX index fund, and, by extension, anyone with a superannuation fund (which is almost all of us).
It's not hard to see why investors are excited about BHP at the moment. Commodities across the board have been rallying in recent months. We've seen fresh new highs after fresh new highs for gold and silver, while copper has been burning higher too. It's the latter material that probably has investors excited over BHP shares today. Although iron ore remains BHP's primary resource, it has been expanding its copper operations rapidly in recent years. With copper up close to 35% since the middle of last year, it's no surprise BHP shares are capturing investors' attention.
But despite the impressive run that BHP has been on over the past 12 months, I'm not considering jumping on this bandwagon and buying BHP shares today.
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Here's why I'm not buying BHP shares today
Mining shares like BHP tend to be highly cyclical. Their share prices tend to follow the price curves of the commodities that they mine and process. BHP is no different. This is a company that has been as low as $33.25 and as high as $49.75 a share over just the past year alone.
This is a familiar pattern in this company's history. Back in July of 2007, for example, BHP was going for about $32 a share. By October of that year, those same shares hit $39 each, before dropping back to $30 by early 2008.
Sure, if you time these swings correctly, there can be a lot of money to make. But that is far easier said than done. I would rather buy shares of companies that don't undergo these rather vicious pricing cycles. It's just less stressful. Even if I did have a penchant for buying mining companies, I would not be doing so after a big gain as we've seen over the past year. Perhaps BHP shares go higher from here. But buying in after such a long run-up rarely ends well for investors.
This cyclicality also makes it very difficult for mining companies to compound their earnings over time and generate the massive wealth appreciation that the world's best stocks are known for.
So all in all, there's nothing I'm finding tempting about BHP shares when they are close to their new 52-week high today. There are simply better places to put your money, at least in my view.
